Nonprofit PPP Forgiveness May Be Harder To Receive Than Original Loan The SBA released an 11-page loan forgiveness application document l ast week listing the criteria charities must follow to get their PPP loans forgiven. Without a well-developed plan there could be hardship for your heirs and business partners. In order for the loan to be eligible for forgiveness, the funds must be used within the covered period. Nonprofit PPP Loan forgiveness – How Does it Work? Not-for-profit organizations have some clear guidance for how to account for forgivable government loans. Note: you may not be able to get forgiveness for the employer’s share of FICA, RRTA, or federal income taxes reported on Form 941. For-profit entities will use Form 3509 and non-profit groups will use Form 3510. But opting out of some of these cookies may have an effect on your browsing experience. NFPs with cost-reimbursement grant funding that will be impacted by this may consider requesting a two-month extension on the affected grants. If you spend more than 25% of your loan on non-payroll costs, you may not be eligible for forgiveness. Because PPP loan forgiveness is dependent on meeting certain conditions, … During the eight-week period after your loan is disbursed, track everything you spend your PPP funds on. If any portion of your loan is not forgiven, those amounts must be repaid within two years. Although the legal form of the PPP loan is debt, some believe that the loan is a government grant. Also note that only 25% of your loan funds can be used for the non-payroll costs mentioned above if you want the full loan amount to be forgiven. Interest on debt must also have been incurred prior to February 15, 2020. All lenders have 60 days from that date that you apply for forgiveness to decide whether or not you qualify. If you have questions about how the PPP loan program and forgiveness calculation impact your organization, please let us know. As many nonprofit organizations have received PPP loan funds and will be requesting loan forgiveness, we wanted to share a couple of articles with our clients that discuss the accounting for these funds. After receiving a Paycheck Protection Program (PPP) loan, it’s time to start thinking about how to use the loan to receive full PPP loan forgiveness.. Here’s our comprehensive guide to make sure you’re on track to receive full forgiveness every step of the way. The current position of the Internal Revenue Service, as articulated on April 30, is that while the PPP loan forgiveness itself does not create taxable income, the expenses that are incurred in creating the PPP loan forgiveness are not deductible expenses for income tax purposes. Your email address will not be published. The panelists will discuss: Explanation of the […], By Jessica Hidalgo, CPA Tax Manager, Blue & Co., LLC A new year is upon us and as you plan out your goals for 2021, don’t forget about estate planning. The AICPA worked with many of its volunteer members, and also the FASB staff, to develop Technical Question and Answer (TQA) 3200.18, Borrower Accounting for a Forgivable Loan … COVID-19 ... that there is no specific guidance on a for profit entity accounting for a forgivable loan from the government. For loans over $2 million, the process begins once the lender has submitted its forgiveness decision to the SBA. We also use third-party cookies that help us analyze and understand how you use this website. In other words, borrowers can get up to 2.5 times their monthly payroll costs without paying a cent. A well-drafted estate plan is essential to ensure your assets are transferred according to your wishes. SUBSCRIBE HERE  to receive “SBA LOAN FORGIVENESS APPLICATION” as soon as it’s released. If my loan isn’t forgiven, how do I pay it back? Copyright © 2021, Blue & Co., LLC. These cookies do not store any personal information. If the not-for-profit elects to record the PPP loan as debt, once forgiveness has been determined, the entity will recognize a … Accounting for PPP loans for not-for-profit organizations will fall under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 958, Not-for-Profit Entities. PPP Loan Amount - This is the maximum amount of loan eligible for forgiveness, by limiting forgiveness to the principal of the loan, and will not include any accrued but unpaid interest. If our non-payroll costs are more than 25%, will nothing be forgiven, including payroll, or only the expenses above 25%? Note: in order to get your loan forgiven, you’ll need to fill out a PPP loan forgiveness application form. Loans issued prior to June 5, 2020 have a maturity of two years. Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features. As a non-profit organization, you may elect to treat the PPP loan under the debt forgiveness model or as a conditional contribution. When completing SBA Form 3508 for loan forgiveness, include the eligible non-cash compensation payments described above on lines 6, 7, and 8 of PPP Schedule A. Learn how to account for the forgiveness of your PPP loan and receive additional guidance as you navigate the PPP loan forgiveness process. By using this website, you agree to our use of cookies as outlined in our. Your financial advisor or payroll provider can help you prepare this report. We will advise as soon as guidance is published, including exposure drafts. My employer, to keep me at 40 hours a week, has been using my vacation time to make up the difference. The covered period. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc. I work for a non profit and since we now have to work from home, I have been averaging approx 36 hours a week, vs 40. If a non-profit receives grant money to pay employee salary expenses can the non-profit still claim the payroll expense for PPP loan forgiveness? When will I find out if my loan was forgiven? What would reduce the amount of my loan that’s forgiven? With employees like ours, how could we not be on the list! If you’re a Gusto customer, use the PPP forgiveness reporting tool in your dashboard to see how much of your loan amount is going towards qualifying payroll expenses. All Rights Reserved. https://www.blueandco.com/ppp-loan-forgiveness-for-not-for-profits Loan payments will be deferred for … Treat the PPP Funds as Government Grants. There are many things in the forgiveness process that still require clarification from the government so you should check regularly for updates and always confirm with your lender for their specific requirements. ... See MoreSee Less. Applications for forgiveness will not be accepted after that period. This category only includes cookies that ensures basic functionalities and security features of the website. If you have previously received a PPP loan, certain businesses are eligible for a Second Draw PPP Loan. guidance: (1) FASB ASC 958-605 or (2) FASB ASC 450-30. Finally, in order to qualify for full loan forgiveness, you must maintain your employee headcount and their compensation levels. Guidance has not been released on the consequences of failing to meet this requirement, so it’s also a good idea to consult with your lender on this. To address this, the SBA will automatically remit a reconciliation payment via ACH to the PPP lender for the previously deducted EIDL Advance amount plus interest through the remittance date. Under most guidance, PPP loan forgiveness is presented as a separate component of income on the statement of operations for business entities or the statement of activities for nonprofit organizations. All Rights Reserved. What info do I need to include in my application for loan forgiveness? The SBA will send a notification letter to the lender requesting that the borrowers complete a questionnaire and provide requested documentation. Notify me of followup comments via e-mail. Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors. CAN WE USE THE PPP MONEY TO REHIRE THE EMPLOYEES? Group term life plans (as long as there are no ancillary benefits for medical care), Long-term and short-term disability plans (again, as long as there are no ancillary benefits for medical care). These cookies track visitors across websites and collect information to provide customized ads. IAS 20 is more flexible on how the income is reported. Luckily, the loans are intended to help with payments many business owners are struggling with right now, including: *Mortgages and lease agreements must have been signed before February 15, 2020. These applications include: PPP Loan Forgiveness Application Form 3508S – this new one-page application is for borrowers who received a PPP loan of $150,000 or less. 1. Not only must you plan to spend funds for allowable purposes (including payroll and benefits, rent, and utilities) to obtain forgiveness of all or a portion of the amounts borrowed, you also must consider how the utilization of the PPP loan forgiveness may interact with other funding your organization has received. and other INSIDE CHARITY content and comments are for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Lenders have 60 days from the date you apply to decide whether you qualify. If, during the eight weeks following disbursement of your loan, your business reduces wages or the number of employees compared to a look-back period, the amount forgiven will be reduced. A major benefit of the PPP is streamlined and simplified loan forgiveness. Portions of the PPP loans may also be accounted for under the debt accounting guidance in ASC Topic 470, Debt. You can also check out our resources on the basics of PPP and forgiveness calculations here. Since the PPP funding is not restricted as to purpose, the organization will be able to allocate its resources in a manner that is most useful (i.e. We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. This would allow for further achievement of grant objectives without additional funding from the grantors. It is our limited understanding that the answer to your question is “yes.”. Unless and until that position is changed, for NFPs that have unrelated business taxable income, we caution that expenses utilized in obtaining the PPP loan forgiveness should not also be deductible against an organization’s unrelated business taxable income in determining the calculation of tax due. Collect proof of payment for your qualifying non-payroll expenses, like rent, mortgage interest, utility payments, owner compensation, and so on. The new legislation expands expenses that are eligible for forgiveness and makes applying for forgiveness even easier. Given the SBA has been remitting forgiveness funds since October 2, 2020, there are loans where the SBA remitted a forgiveness payment to a PPP lender that was reduced by an EIDL Advance. Analytical cookies are used to understand how visitors interact with the website. At the end of the eight-week period, use your federal and state payroll tax filings to prepare a report of all your eligible payroll expenses, including employer contributions to health plan premiums and unemployment insurance. Here’s what we’ve learned so far. We are so proud that we have been named one of Indiana's Best Places to Work. Since the PPP funding is time-restricted rather than purpose-restricted, it would normally be used first in order to avoid losing its eligibility. What do I need to do to get my loan forgiven? All loans are subject to credit approval and program guidelines. Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. Updated PPP Loan Forgiveness Applications and Rules: New guidance on the PPP loan forgiveness application includes the release of four new / updated forms: Form 3508S – a one-page application for borrowers that received a PPP loan of $150,000 or less. In this session, you will learn more about the expansion of the Employee Retention Credit (ERC). Nor is there a consensus on how to report amounts on the financial statements and related notes. SBA PPP Loan Support, Guidance, and Documents If an NFP chooses not to follow FASB ASC 470 and it expects to meet the PPP’s eligibility criteria and concludes that the PPP loan represents, in substance, a grant that is expected to be forgiven, it should account for such PPP loans in accordance with FASB ASC 958-605 as a The PPP funds would supplement the grants and the organization as intended. What if I’ve already had to lay off employees—can I still get loan forgiveness? It’s also important to note that you are not allowed to deduct any expenses you paid the forgivable funds with. Without a well-developed plan there could be hardship for your heirs and business partners. June 10, 2020. Similar to the grant funding issue, we caution against applying the same costs to both donor-restricted contributions received for specific purposes and to the PPP loan forgiveness calculation. Save my name, email, and website in this browser for the next time I comment. If general operations cannot utilize the full amount of PPP funding, NFPs may apply the remainder of PPP funds to designated programs in lieu of restricted funds. approximately 75% of the PPP amount). With employees like ours, how could we not be on the list! https://www.forbes.com/sites/brianthompson1/2020/05/04/what-you-can-do-now-to-maximize-paycheck-protection-loan-forgiveness/#253eed643efc, Payroll costs (more on what this means in the next section), Additional wages to account for the reduction in tips for tipped employees. Nonprofit PPP Loan forgiveness – How Does it Work? You also have the option to opt-out of these cookies. A private non-profit or small agricultural cooperative ; Your business must be directly affected by COVID-19; To apply or for more information, please visit the Small Business Administration Portal. While we have yet to see authoritative guidance on the following topics, we suggest that you begin considering how the PPP loan forgiveness may interact with and affect the following: For NFPs that have received cost reimbursement grants, track costs to be utilized for PPP forgiveness similar to a separate grant in order to ensure that the same costs are not applied both to a grant and utilized to create forgiveness of the PPP loan. Among the guidelines are directions on how to calculate payroll costs, which must account for 75% of loan proceeds spent. The rules and application process for PPP loans and forgiveness have been modified, with more businesses eligible for PPP loans (INCLUDING 501 (c) (6) NON-PROFITS), more expenses … NFPs with June 30 year-ends will likely not have received approval for loan forgiveness from the SBA at fiscal year-end, but will be in a position to assert compliance with criteria for loan forgiveness and that the loan, or a portion thereof, will not have to be repaid. THE STORE IS NOT CONSIDERED AN ESSENTIAL BUSINESS. WE HAVE RECEIVED OUR PPP MONEY AND WOULD LIKE TO REINSTATE THE EMPLOYEES. Unlike for-profit entities currently, not-for-profit accounting already has clear guidance in place on accounting for loan forgiveness. ... See MoreSee Less, Share on FacebookShare on TwitterShare on Linked InShare by Email, Setting up and reviewing an estate plan is an important part of your overall financial plan. Thank you! In cases where your PPP loan isn’t forgiven, make arrangements directly with your lender to repay the loan. Below are ten important things to know about the Paycheck Protection Program (“PPP”) Loan Forgiveness ‎Applications and the detailed instructions for … PPP Loan Forgiveness Considerations for Not-For-Profits, Contributions Received With Donor Restrictions. Remember, you must apply for forgiveness within 90 days of the end of the eight-week period. If you receive your PPP loan on or after June 5, you will have 5 years to repay the loan. Nonprofit PPP Loan forgiveness – How Does it Work? Once you’ve applied for and received a PPP loan, you must spend the loan on approved expenses in order for it to be eligible for forgiveness. If you’re unable to uphold the loan forgiveness requirements, don’t worry—your loan payments will still be deferred up to six months. The PPP in brief. Loans issued after June 5, 2020 have a maturity of five years. For example, if you’ve received PPP loan funds, you must apply for forgiveness within 90 days after the eight-week loan term. Resources. The purpose-restricted funds would still be available for designated programs after the PPP timeframe ends. In your application for loan forgiveness, you must document the following: You should check with your lender to determine if any additional information is required. As you plan to spend funds received through the Paycheck Protection Program (PPP) loan, there are many considerations not-for-profit organizations need to take into account. We’re here to help. It is important to distinguish your PPP loan was passed through banks, but that the funds came from the government. This makes sure that the payments escape the $20,833 cap per individual and add to your forgiveness. The guidance suggested that a nongovernmental entity ( including not-for-profits, “NFP” ) may account for the PPP loan as a financial liability in accordance with FASB ASC 470, Debt, if certain conditions are met. Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet. Whether you need to review an existing plan or […], By: Justin Gubser, CPA, and Aimee Reavling, CPA The Employee Retention Credit (ERC) is one of the most significant taxpayer relief provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act but has flown under the radar for most of the past 12 months due to its initial limitations related to the first round […], We are so proud that we have been named one of Indiana's Best Places to Work. Pre-June 5 th PPP loans can be extended up to 5 … Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. https://insidecharity.org/2020/05/03/nonprofit-ppp-loan-forgiveness Additional Eligibility Criteria and Requirements for Certain Pledges of Loans for the Paycheck … Forgiveness for PPP loans is obtained by (subject to change – pending additional guidance from SBA): Incurring payroll and other qualified expenses (mortgage interest, rent, utility payments) over an 8 week period or 24 week covered period (as defined by guidance issued by the SBA and Treasury) after the loan is made. is based on Inside Charity’s direct communications with the Small Business Administration and multiple financial lenders. Your email address will not be published. Join Blue & Co. on Wednesday, March 3 from 12:00 p.m. to 1:00 p.m. EST for a webinar entitled Understanding the Employee Retention Credit (ERC): What You Need To Know. Organizations that Expect to Have Some or All of Their PPP Loan Forgiven NFPs that intend to seek forgiveness may look to Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) 958-605, Not-for-Profit Entities: Revenue Recognition for guidance. In order to have rehired employees count in your report, you must run a payroll that includes any rehired employee before generating your payroll report. If you’ve let go of employees or reduced their wages between February 15, 2020 and the end of the eight-week period following the disbursement of your loan, you have until June 30, 2020 to rehire employees and/or reverse any pay cuts to prevent your loan forgiveness amount from being reduced. © 2021 InsideCharity.org. PPP loans have an interest rate of 1%. If the full amount PPP funds cannot be utilized by non-UBI activities, NFPs would still apply the remainder against UBI activities in order to use the PPP funds, but these amounts would not be deducted as expenses on the 990-T. The NFP would still receive a benefit equivalent to the PPP amount minus the tax reduction (i.e. Congress created the PPP as part of the $2 trillion Coronavirus Aid, Relief, and … Nonprofit PPP Loan forgiveness – How Does it Work? What costs are included under forgivable payroll costs? PPP funds can be applied to general operations and restricted funds can be applied to designated programs). WE HAD TO CLOSE OUR THRIFT STORE AND LAY OFF THREE OF OUR OUR EMPLOYEES. For PPP loans of $150k or less, the SBA has simplified the PPP loan forgiveness process. Logically, the same dollar of cost cannot consume two different dollars of funding sources. Now that many not-for-profit (NFP) entities have received a loan under the Small Business Administration’s Paycheck Protection Program (PPP), they are now trying to determine how and when to account for the forgiveness of the loan. Eligible Nonpayroll Costs. Note: If you’re using credits from the FFCRA for any of the above, those amounts are not eligible for forgiveness. Up to 40% of the eligible costs resulting in forgiveness can relate to non … This website uses cookies to improve your experience while you navigate through the website. Once you’ve fulfilled all their requirements, submit your forgiveness application to your lender with the proper documentation within 90 days after the final day of your eight-week loan term. Guidance on that clause has yet to be released, so check back here and with your lender for updates. Where can I find this information within the Cares Act: “if you’ve received PPP loan funds, you must apply for forgiveness within 90 days after the eight-week loan term.”, Here’s our citation: https://www.forbes.com/sites/brianthompson1/2020/05/04/what-you-can-do-now-to-maximize-paycheck-protection-loan-forgiveness/#253eed643efc. Hi, can you point us to the guidance on why QSEHRA disbursements do not qualify for forgiveness? Below are the three primary areas to consider. In order to qualify for loan forgiveness, will they be required to reinstate the vacation time they have been using to make up my hours? (If you’re not yet up to speed on what PPP loans are, read one of our many articles on the program to get caught up.). I received a call this morning from a subscriber asking the following question. (Don’t be surprised if there’s confusion early on!). Make sure the items map back to the list of forgivable expenses, and track how much you’re spending on non-payroll costs to get an idea of how much of your loan will be eligible for forgiveness (try to keep it under 25% of the full amount you spend). The AICPA recently affirmed this guidance for not-for-profit … These cookies will be stored in your browser only with your consent. How loan forgiveness is calculated if part if the payroll cost is covered by government contacts that are funding the programs of a non profit organization? Governmental assistance in the form of loan forgiveness would be considered a nonreciprocal or non-exchange transac­tion referred to in the guidance as a con­tribution. As guidance continues to be provided related to the PPP loan program, we will continue to alert you to key issues of importance. All content on this site is information of a general nature and does not address the circumstances of any particular individual or entity. On December 22, 2020, Congress passed a bill renewing funding under the CARES Act, including an additional $284 billion earmarked for America’s struggling small businesses. Otherwise, your forgiveness amount will be reduced. PPP loan forgiveness . Also, borrowers with loans greater than $150,000 may be able to include additional eligible non … A nongovernmental entity may account for a Paycheck Protection Program (PPP) loan as a financial liability in accordance with FASB ASC Topic 470, Debt, or under other models, if certain conditions are met, according to new guidance for borrowers issued Wednesday by the AICPA. Check with your lender to see if they require anything else in order to get your loan forgiven. Important PPP update for 2021. PLEASE NOTE: The Small Business Administration HAS NOT provided the ACTUAL APPLICATION TO BE USED FOR LOAN FORGIVENESS. Necessary cookies are absolutely essential for the website to function properly. As many nonprofit organizations have received PPP loan funds and will be requesting loan forgiveness, they will have a couple of options on how to proceed. was first posted at INSIDE CHARITY, For more articles like Nonprofit PPP Loan forgiveness – How Does it Work? The AICPA has provided guidance that allows for not-for-profit entities to treat forgiveness of a PPP loan as debt and loan forgiveness or as a conditional contribution. In the essence of most nonprofits, the conditional contribution model is most practical and aligns with other sources of … If you’ve made any staffing or wage reductions between February 15, 2020 and the end of the eight-week period following disbursement of your loan, you have until June 30, 2020 to rehire employees and restore salary levels. At this time, there is not authoritative guidance for how to report the loan at year-end when the NFP is awaiting approval from the SBA. There is a clause in the CARES Act that says as long as you rehire your employees and restore wages by June 30, 2020, reductions of your forgiveness amount can be waived. Current Requirements for Documentation and Reporting, Implementation Guide: ASU 2016-14 Presentation of Financial Statements for Not-for-Profit Entities, Webinar: Understanding the Employee Retention Credit (ERC): What You Need To Know, Estate Planning 101 for Dental Practices in 2021, An Overview of the Employee Retention Credit (ERC). PPP Loan Disbursement Date - The date borrowers receive the funds is the start of the 8-week period for the payment of expenses eligible for forgiveness. On Tuesday, the U.S. Small Business Administration (SBA) and Treasury released new PPP loan forgiveness guidance along with new forgiveness applications. If you use any part of your PPP loan for expenses not on this list, that amount cannot be forgiven. Whatever is not forgiven is paid back at a 1% interest rate. You’re Invited! For PPP loans made before June 5, 2020, the loan amount not forgiven will be due within 2 years of when you received the money. VISIT HERE. PPP Loan Forgiveness. Setting up and reviewing an estate plan is an important part of your overall financial plan. We asked our trusted friends at Fiscal Management Associates to answer the burning nonprofit-specific Paycheck Protection Program questions on all of our minds. You can also subscribe without commenting. Required fields are marked *. Although SBA guidance does not specifically address it, we believe this would likely be considered double-dipping, either by the SBA, the grantors, or both. Fair warning, the Small Business Administration (SBA) and the Treasury have not yet issued guidance about how this works, so this requirement may change in the future. THE THRIFT STORE IS NOT OPEN YET, WE ARE WAITING FOR OUR GOVERNOR TO GIVE US THE GREEN LIGHT TO OPEN THE STORE. Nothing on this site constitutes professional and/or financial advice, nor does any information on the site constitute a comprehensive or complete statement of the matters discussed or the law relating thereto. The AICPA issued technical guidance for accounting for a Paycheck Protection Program (“PPP”) loan for nongovernmental entities (including not-for-profit entities). However, “free” money is seldom unconditional. As a bonus, any forgiven loans will be excluded from gross income for tax purposes. Beyond the ease of qualifying and low interest rates, perhaps the most attractive feature of Paycheck Protection Program (PPP) loans is that they are eligible for “forgiveness.” This means that the lender can release the borrower from the obligation of repaying the balance. A record of the number of full-time employees and pay rates your business maintains during the eight-week loan period, via the following documentation: state income, payroll, and unemployment insurance filings, Proof of payment, including cancelled checks, receipts, and other documentation that verifies payments for mortgage, lease, and utility payments, A certification that all the information you provide is accurate and that your loan was used to retain employees, or make rent, mortgage, or utility payments.
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